Monday, March 2, 2015

Mark Weisbrot on Latin American Growth

This was one of the several presentations at the Eastern Economic Association meetings. Mark suggested that the the period of high growth from 2003 to around 2008, was not related essentially to the commodity boom, although "commodity exports did not lead growth but helped avoid balance of payments problems."* He argued that the IMF's loss of influence was also important. This point, which I think is essentially correct for many left of center governments, was discussed later over lunch. I argued, and I guess so did Esteban Pérez and Ricardo Summa, that the IMF still does have influence indirectly, now internalized in the training of several of the local bureaucrats that are for devaluation and fiscal austerity as a solution for, real or imaginary, external crises and inflationary pressures.

Two important caveats to the good news of growth, better income distribution and lower poverty that he discussed. We are "still long way from achieving pre-1980 growth rates, when industrial and development policies were common [and] exchange rate problems can still cause trouble." On the latter, in particular, the Argentinean and Venezuelan stories, with negative real rates of interest, and a large gap between official and black market exchanges was emphasized. Not sure what he would say, but I think he would agree that if growth remains lackluster in the near future for the region, then it would have more to do with the domestic policy choices that with an overwhelming need for adjustment.